The face-off that wasn't: IOC bid for Haldia Petrochemicals stake accepted

The once widely anticipated confrontation between Mukesh Ambani and Anil Agarwal over a stake in the ailing Haldia Petrochemicals Ltd (HPL) will now never occur. Ultimately neither Ambani's Reliance Industries Ltd, nor Agarwal's recently acquired Cairn India, bid for the 31 per cent stake in HPL the West Bengal Industrial Development Corporation (WBIDC) had put on offer. On Thursday (October 10) the West Bengal government accepted the sole bid - for an amount undisclosed so far - that had been made by Indian Oil Corporation (IOC).

IOC already has an 8.89 per cent stake in HPL. The acquisition will raise its holding to nearly 40 per cent, almost on par with that of the other major shareholder in HPL, The Chatterjee Group, led by Purnendu Chatterjee, which has 40.88 per cent. With the sale, the WBIDC's stake will shrink to 8.99 per cent, while the rest is held by financial institutions and Tata Group companies such as Tata Motors and Tata Power.

Whether IOC acquires the stake now depends entirely on Purnendu Chatterjee. TCG has the right of first refusal and has been given 30 days to match IOC's offer.

IOC also supplies naptha to the plant. It has a refinery close by, which, if the acquisition comes through will help it to integrate operations with HPL and increase the latter's profitability.

Acquiring a stake in HPL would have been in both RIL and Cairn's interest. Reliance is currently a leader in the petrochemicals business and dominates more than half the petrochemicals market in the country. A large stake in HPL would have given it an entry into eastern India, where petrochemical products so far are largely imported.

Cairn until now has been primarily engaged in oil exploration at its Mangala oil field in Rajasthan, and acquiring the HPL stake would have given it an entry into refining petrochemicals as well.

Cairn India officials, however, claimed that expressing interest in HPL had been merely a strategic move to understand the petrochemicals market, without actually getting into it.

RIL, on the other hand, was thought to be a serious contender for the stake. Mukesh Ambani even recently met West Bengal Chief Minister Mamata Bannerjee. But once the West Bengal government insisted on only accepting closed bids, as against the open bidding sought by Ambani, RIL too chose to stay away.

In fact, the West Bengal government initially wanted to sell its entire 39.99 per cent stake, but TCG threw a spanner in the works. It moved the Calcutta High Court laying claim to 8.99 per cent of the very stake the government intended to sell off, and the court directed the government to sell only 31 per cent.